In February a Maltese court annulled a 2.1-billion-euro public healthcare contract over suspicion of fraud. Financial records obtained by reporters show the people behind the contract used company accounts to buy personal and luxury items, and funneled millions of euros to themselves and relatives under the guise of loans and other payments.
Thousands of Maltese citizens took to the streets of their capital city in February and March, bearing placards that said “Give us our money back” and shouting “Mafia”! “Corrupt people”!” “Thieves!”
They were reacting to the court annulment of a deal that has long been controversial in the Mediterranean nation: A 2015 agreement to pay 2.1 billion euros to a group of recently-created companies, with no track record in managing healthcare, to renovate three of Malta’s four public hospitals.
Since the deal had finally been deemed fraudulent, protesters wanted the Maltese government to recoup the hundreds of millions in public funds already paid out to the companies, which are accused of making only superficial improvements to hospitals, some of which are today in decrepit condition.
Now, financial documents obtained by OCCRP and shared with partners
in Malta — including bank statements covering thousands of transactions between October 2015 and January 2020 — reveal that the people behind these companies benefited from over 1 million euros in company expenses, including spending on personal and luxury items. Millions of euros were also transferred to a company director and other people linked to the contract winners.
A separate set of documents obtained by reporters reveal that a group of Swiss companies, which received millions of euros in payments from the hospital concessionaires, later paid a total of 60,000 euros in consultancy fees to Malta’s former prime minister, Joseph Muscat. These payments, which Maltese investigators suspect may be linked to the hospital contract deal, are subject of a separate corruption probe into Muscat’s business activities.
The former prime minister strongly denied to OCCRP that the payments were linked to the hospital concession, and said they were for legitimate and documented consulting work.
Though it is impossible to determine whether the funds paid by the government for the hospital contracts were used to make the newly-revealed purchases, the revelations raise questions over how the people charged with renovating Malta’s hospitals actually spent the money from the contract.
Vitals Global Healthcare (VGH), a group of three related companies, won the concession in November 2015, despite having only been recently formed and having no experience in managing healthcare. VGH said it would work with experienced healthcare providers, but the court ruling found that it failed to meet crucial milestones in its contract.
By the end of 2017, less than three years after winning the deal, VGH was deeply in debt, despite having been paid 52.7 million euros by the Maltese government over the course of its contract, according to a report issued this week by Malta’s national audit office. In February 2018, the ownership of VGH was transferred to the U.S. hospital chain Steward HealthCare and it was renamed Steward Malta. After that, the government paid a further 214.9 million euros to Steward, up to the end of 2021, according to the new audit report.
The change of ownership is now the subject of dispute. Last month former VGH owner Sri Ram Tumuluri filed a whistleblower complaint with the U.S. Securities and Exchange Commission, alleging that Steward colluded with Maltese officials to ensure it could take over VGH. The 505-page complaint includes an affidavit from Tumuluri and hundreds of pages of supporting documents, including internal emails, contracts and project plans.
Steward said it “emphatically rejects any and all allegations of impropriety made by Tumuluri.” Keith Schembri and Konrad Mizzi,
two controversial government figures named in the complaint, also strongly rejected Tumuluri’s claims.
In written comments provided by his lawyer, Tumuluri denied that VGH obtained the contract fraudulently and said the spending by VGH’s parent company, Bluestone Investments Malta Limited, was financed by investors and shareholders, not the hospitals contract. “The funds used for that spending were not VGH funds,” he said.
Steward has sought to place the blame for the contract’s continued failure on VGH’s previous owners and on the government’s reluctance to renegotiate the terms of the concession. In public statements, Steward executives described the original agreement with VGH as a
mismanagement of public funds. It also said all payments since its takeover were for professional services and that it had no commercial engagements with Muscat.
“These are devastating allegations: that millions of euros for a public hospital to treat sick people have been catastrophically mismanaged,” said Gavin Hayman, Executive Director of Open Contracting Partnership. “The whole purpose of having public procurement rules is to prevent this kind of controversy.”
“We know the authorities have canceled the contract: what we have to see next is a full, public investigation and, if the allegations are found to be true, that those involved are held to account,” Hayman added.
Spending Spree
The financial documents obtained by OCCRP — which include bank statements for VGH, its former parent company Bluestone, and Steward Malta — show that VGH sent at least 21 million euros to Bluestone between September 2016 and February 2018, at which point Steward acquired the majority of VGH’s shares. The money sent by VGH was the primary source of funds in Bluestone’s account.
Though it is impossible to determine if any of those funds came from the hospital contracts, bank records show some of the transfers to Bluestone were made within a day of VGH receiving payments from the Maltese government. Bluestone’s account was then used for private spending, including hundreds of thousands of euros in jewelry shops, beauty salons, pet stores, private school fees, and even Netflix subscriptions.
A total of 248,000 euros was spent at Kind’s Auto Sales, the local agents for Mercedes Benz. The transaction descriptions indicate that the money was spent to lease expensive models like the Mercedes-Benz S-Class.
A further 180,000 euros was spent on point-of-sale purchases, including at a flower shop and a veterinarian’s office, plus payments at clothing shops and grocery stores.
The banking data shows cash withdrawals from Bluestone’s account at ATMs in Malta and Zurich, amounting to 54,000 euros between 2015 and 2017.
Almost half a million euros from the Bluestone account were spent on hotel and travel expenses, and another 33,000 euros on private schooling in Switzerland and Malta — including over 20,000 euros at the exclusive Quality Schools International. It’s impossible to identify the beneficiaries of all of the payments, but one 12,077-euro payment to the private school was classified as “Ram expenses,” according to the banking data.
Via his lawyer, Tumuluri told OCCRP that he had a contract with Bluestone that included “the provision for personal expenses and school fees for my children.” He said that these payments came from “investor sources” and not public money sent to VGH.
The data also includes a 6,300-euro stay at the Hilton in Podgorica, Montenegro, paid for in October 2016, 25,000 euros in payments to Five Star Hotels Ltd and a 3,500-euro payment to the Marina Hotel Corinthia, a beach resort in Malta.
Millions in Payments
Records obtained by reporters don’t just detail personal spending and luxury trips. They also show millions funneled to Tumuluri and a Pakistani man named Shaukat Ali, as well as Ali’s sons, through both Bluestone and Swiss intermediary Accutor AG.
Bluestone wired 5 million euros from its accounts to two United Arab Emirates companies called Mount Everest owned by Tumuluri and Ali, who is described as a VGH “consultant” by Tumuluri in his U.S. whistleblower complaint. Millions more were sent to Ali’s relatives or companies they owned, marked as “consultancy” or “loans.”
Ali told OCCRP that members of his family “worked for VGH as consultants or employees.” Via his lawyer, Tumuluri said “investors and shareholders invested close to $10 million into Bluestone” and that any payments to him “were for Bluestone-related ventures…(they) were not VGH funds.”
Bluestone also wired hundreds of thousands of euros to Accutor, a Swiss company owned by businessman Wasay Bhatti. Following Steward’s takeover, VGH (under its new name Steward Malta) sent around 6 million euros to several of Bhatti’s Swiss companies, including Accutor Consulting AG, between March 2019 and January 2020.
Steward International said that Accutor Consulting was “engaged…for legitimate business services.”
Reporters obtained partial financial records for Bhatti’s Swiss companies, covering October 2015 to January 2020.
According to the payment descriptions, the money was for payroll and consulting services. Because the financial records were not complete, journalists could not determine whether Bhatti’s companies had other sources of funds.
Between July and October 2018, Accutor AG sent about 173,000 euros to Shaukat Ali and his relatives. Following the Steward takeover, the Swiss company also paid 1.2 million euros to a law firm with descriptions referencing “RamTum.”
Ali told OCCRP that he was employed by Accutor as a “senior advisor” and received salary payments from the company. He added that records from Accutor “were never accurate, there was a lack of professionality and chaotic inaccuracies.”
Tumuluri’s lawyer said that after Steward took over the hospital contract it owed Tumuluri money under an agreement, and Tumuluri had Steward send the funds to Accutor at that time.
Bhatti told OCCRP that Tumuluri “had no role in Accutor…it was a simple client relationship.”
Corruption Probe
Two of Bhatti’s Swiss companies — Accutor Consulting and Spring XMedia AG — are now at the center of a corruption probe by Maltese authorities who are looking into payments to Muscat, the former prime minister, who stepped down in January 2020 but was in office when the hospital contract was awarded to VGH.
Muscat received 60,000 euros, in four 15,000-euro tranches, from Accutor Consulting and Spring XMedia, shortly after leaving office.
The payment to Muscat was based on a consultancy agreement, obtained by reporters, that was set to earn him 15,000 euros per month for 36 months. The payments appear to have stopped after just four months. A document attached to the contract says that Muscat would be paid for providing “consultancy services as senior advisor.”
Maltese investigators told OCCRP partner Times of Malta that they suspect a consultancy contract signed by Muscat in 2020 could have been used as a vehicle to disguise payments from the “fraudulent” hospitals deal. The investigators spoke on condition of anonymity since they were not officially allowed to comment, but their information was corroborated by official documents obtained by OCCRP.
Muscat denies this is the case, insisting the money paid to him was for legitimate work as a consultant. But OCCRP found the company that paid Muscat had close links to VGH: Accutor Consulting was called VGH Europe until January 2018 — just before Steward officially acquired VGH in Malta — when it changed its name.
People connected to VGH and Accutor confirmed that the companies had worked closely together. Tumuluri’s lawyer told OCCRP that Bluestone appointed Accutor to help it expand the VGH group into Europe. A former Accutor executive, who said he could not be named due to a related ongoing Swiss investigation, said VGH Europe formed part of plans to expand VGH’s presence in other parts of Europe. And Mark Pawley, a former director of VGH and Bluestone, confirmed this was the case, telling OCCRP that VGH Europe was set up as Tumuluri “made the move to Switzerland.”
Claims of Collusion
Both the original hospitals contract and the transfer of ownership of VGH have been met with claims of collusion, strongly refuted by the companies.
In a July 2020 report into the hospital concession, the Maltese national auditor pointed to a October 2014 memorandum of understanding between Malta’s economy minister and the investors behind Bluestone and VGH, as well as Shaukat Ali (whose name does not appear on VGH or Bluestone documents), that seems to lay the groundwork for the investors to win a hospital contract months before the public tender was announced.
The national audit office report said the “relevance of [the memorandum of understanding] is paramount, for it predates the [public tender],” and “noted the significant overlap between” the people named on the document “and the eventual investors of the VGH.”
Ali told OCCRP the memorandum of understanding was “non-binding” and was “superseded” by another signed “a couple of months later” that did not include him or his relatives.
Via his lawyer, former VGH owner Tumuluri denied the allegation of collusion with officials and told OCCRP the memorandum of understanding — “which did not involve VGH” — was “non-binding” and was aimed at “exploring the opportunity” of an investment in Malta’s healthcare sector. The memorandum of understanding was terminated a few months later, and then VGH won the tender with a new submission, his lawyer said.
Separately, Tumuluri himself filed a complaint with U.S. authorities last month accusing Steward HealthCare of colluding with Maltese officials and VGH’s then-CEO, Armin Ernst, during the takeover of VGH in 2018.
Emails included in the complaint show Ernst — who left a job with Steward to become the CEO of VGH, and remained as the CEO when it was renamed Steward Malta — was personally involved in discussions with Maltese officials about the takeover of VGH by Steward. Via his lawyer, Tumuluri described Steward’s acquisition of VGH as a “hostile takeover,” but said he could not discuss the issues raised in his SEC whistleblower complaint because he could not comment on “any ongoing investigations.”
Ernst declined to comment, but Steward and Maltese government officials angrily rejected Tumuluri’s allegations that the 2018 takeover involved collusion.
“I vehemently protest against these baseless allegations and false claims,” said Keith Schembri, the former chief of staff to Muscat, in a written statement.
Steward said the accusations were “entirely without merit.” The company has gone on the offensive since the February court ruling that annulled the hospitals contract, appealing the verdict and filing complaints against Malta at the European Court of Justice.
Alina Tsogoeva (OCCRP) and Simone Olivelli (IRPIMedia) contributed reporting. The Daphne Caruana Galizia Foundation supported the project with research and coordination of investigative work.
